Beijing’s Export Controls on Heavy Magnets Stall Supplies to Indian EVs and Defense, Sparking Supply Chain Crunch and Diplomatic Maneuvers
In a move that underscores Beijing’s strategic leverage in the global supply chain for critical minerals, China has demanded formal assurances from India that heavy rare earth magnets imported from Chinese firms will not be re-exported to the United States. This development, reported on October 8, 2025, comes as shipments of these vital components remain stalled, exacerbating shortages for India’s burgeoning electric vehicle (EV) and defence sectors. With China controlling nearly 90% of the world’s production of heavy rare earths—essential for high-efficiency motors in EVs, wind turbines, and aerospace applications the request highlights the geopolitical undercurrents of the ongoing US-China trade war spilling over into India-US economic ties. Indian companies have begun providing end-user certificates (EUCs) to comply, but experts warn this could complicate New Delhi’s balancing act between its two largest trading partners.
The Core of the Dispute: Export Controls and Assurances
China’s Ministry of Commerce imposed stringent export controls on medium and heavy rare earth-related items in April 2025, ostensibly to “safeguard national security” in retaliation to escalated US tariffs under President Donald Trump. These controls require exporters to obtain licences only after securing EUCs from buyers, ensuring the materials are used domestically and not diverted to restricted destinations like the US. For India, this means written commitments akin to those under the Wassenaar Arrangement—a multilateral regime governing dual-use goods—that heavy rare earth magnets, such as those containing dysprosium and terbium, will be confined to local manufacturing needs.
Sources familiar with the matter indicate that Chinese suppliers have halted deliveries until these guarantees are in place. “Our understanding is that China is looking at some deal with the US on heavy rare earth magnets and is unwilling to release supplies without a guarantee that there will not be any diversion,” a senior industry executive told The Economic Times. While light rare earth magnets resumed flowing post the September 2025 Shanghai Cooperation Organisation (SCO) Summit, heavy variants—crucial for heat-resistant, high-performance applications—remain in limbo. This selective resumption has left Indian importers in a bind, with FY25 imports of rare earth magnets totaling just 870 tonnes worth ₹306 crore, already down due to earlier disruptions.
The demand for assurances is not isolated; it reflects Beijing’s broader strategy to weaponize its rare earth monopoly. China has ceased publishing country-specific export data for these materials, amplifying uncertainty. Recent expansions to the controls also bar unauthorised foreign collaborations and mandate licences for recycling equipment, further tightening the valve on global access.
Broader Geopolitical Context: Trade Wars and Supply Chain Vulnerabilities
The timing of China’s overture coincides with heightened US-China frictions, including tariffs peaking at 145% on Chinese goods and reciprocal levies at 125%. Beijing views rare earths as a basket of 17 elements, with heavy variants like dysprosium (99.9% processed in China) holding the most leverage due to their scarcity and applications in defense technologies such as jet fighters and missiles. The US, entirely dependent on China for these, is racing to build domestic capabilities pledging subsidies for firms like MP Materials at double market prices but progress is slow.
For India, caught in the crossfire, this episode revives memories of unfulfilled promises. In August 2025, during Chinese Foreign Minister Wang Yi’s visit to New Delhi, assurances were given to address India’s needs in rare earths, fertilizers, and tunnel-boring machines. Yet, nearly two months later, supplies lag, prompting skepticism in Indian media. China yet to resume rare earth exports to India despite Wang Yi’s assurance,” headlined one report, highlighting delays that have hit EV manufacturers hard. Domestic testing of heavy rare earth samples for EV magnets is underway, but without steady imports, production costs could rise, derailing India’s goal of 30% EV adoption by 2030.
Globally, the ripple effects are profound. Japan’s 2012 initiatives with Vietnam and the EU’s diversification pushes underscore the urgency, yet China’s dominance persists. The US-India iCET partnership, expanded in late 2024 to include rare earths collaboration, positions New Delhi as a key ally in de-risking from Beijing—but at the risk of alienating China, India’s top trading partner with bilateral trade exceeding $130 billion annually.
| Key Rare Earths Affected | Global Production Share (China) | Primary Indian Applications | Import Value (FY25, India) |
|---|---|---|---|
| Dysprosium | 99.9% | EV Motors, Wind Turbines | ₹306 crore (total magnets) |
| Terbium | 99% | Heat-Resistant Magnets | N/A |
| Gadolinium | 95% | Electronics, Defence | Part of 870 tonnes total |
Data compiled from CSIS and Economic Times reports; values approximate.
Implications for India: Balancing Act and Domestic Push
The supply drought threatens multiple fronts. EV firms like Tata Motors and Mahindra are grappling with efficiency losses if forced to switch to ferrite or light rare earth magnets, potentially hiking vehicle costs by 10-15%. Defence and renewable energy sectors, reliant on these for precision tech, face similar bottlenecks. “The ongoing delay could hamper India’s ambitions in electric mobility and high-tech manufacturing,” noted analysts, with the State Bank of India estimating annual rare earth imports at $33 million over the past four years.
In response, India is accelerating self-reliance. Amendments to mining laws prioritize 30 critical minerals, including rare earths, while partnerships like the Minerals Security Partnership (with 15 nations) aim to boost overseas access. Beach sand deposits in Kerala and Odisha hold promise—India boasts the world’s fifth-largest reserves but processing lags far behind mining. Experts urge joint ventures with the US and Japan to fast-track separation and magnet production, potentially raising India’s global share from under 1% to 10% by 2030.
Diplomatically, New Delhi must tread carefully. Providing the sought assurances could strain US ties, especially amid deepening Quad collaborations. Yet, non-compliance risks prolonged shortages. “This is a test of India’s supply chain resilience,” said a Delhi-based think tank expert. Bilateral talks, possibly at the upcoming BRICS Summit, may offer a venue for resolution.
Conclusion: A Mineral Flashpoint in Multipolar Chess
China’s demand for no-diversion pledges on heavy rare earths to India is more than a trade hiccup—it’s a calculated play in the great power rivalry, forcing New Delhi to navigate the US-China fault lines. As shipments stall and industries scramble, the episode exposes the fragility of global mineral chains dominated by one player. For India, it’s a clarion call to invest in domestic capabilities and forge diversified alliances.
